- The Birkenstock IPO is drawing attention to the company’s recent growth under the control of LVMH-affiliated private equity investor Al Catterton.
- The brand got an additional boost from its recent role in the hugely popular film “Barbie.”
- The iconic footwear company is well positioned in the retail IPO market, but the track record of footwear public offerings has been mixed, ranging from the successes of Crocs, Skechers and Deckers Outdoor to the stock market struggles for Allbirds and On Holding.
Birkenstock sandals on display at the Nordstrom department store in the Shops at Merrick Park, Miami.
Jeff Greenberg | Universal Images Group | getty images
Birkenstock, the iconic 18th-century footwear company, officially announced Tuesday what has been rumored in the press for months: It’s planning an initial public offering.
The company filed its IPO registration details on Tuesday afternoon.
The deal, which comes two years after the Birkenstock family sold a majority stake in the company to LVMH-affiliated private equity firm L Catterton, is attracting investor attention due to the growth seen since the purchase and the subsequent bounce back for the brand . Recent cameo in the hugely popular movie “Barbie”.
Birkenstock, which started as a single shoe maker in Germany named Johann Adam Birkenstock, is now planning an IPO with a valuation of $8 billion. Birkenstock moved away from its long-held family ownership structure in 2021, when LVMH-backed private equity firm L Catterton acquired a majority stake in the company. At the time, the deal was valued at $4.85 billion.
Annual revenue is projected to grow from approximately $781 million in 2020 to more than $1.3 billion in 2022, a 31% annual growth rate. The IPO filing did not include a potential valuation, but did reveal that net revenue for the six months ended March 31 rose 19% to $692.9 million, although profit declined 45.3% compared with the year-ago six-month period. I.
Birkenstock plans to trade on the New York Stock Exchange under the ticker “BIRK”.
Recent press reports have suggested that the company could be valued at around $8 billion. Over the summer, L. Catterton’s beauty company Oddity surged 40% in its Nasdaq debut, but it is down more than 20% for the year since its first day of trading. Footwear companies have had success in the public markets recently, but by no means in the long term. Crocs, Skechers and Deckers Outdoor are all examples of footwear stocks that have performed well – but Allbirds and On Holding have struggled.
“Given the very good trading at comparable companies this year, perhaps Birkenstock and perhaps some other fashion names will be encouraged to go public,” said Angelo Bochanis, IPO analyst at Renaissance Capital.
“Consumers buy our products for thousands of the wrong reasons,” Birkenstock CEO Oliver Reichert said in the IPO prospectus. “But they all came back… Through our brand’s strong reputation and universal appeal – enabling extensive word-of-mouth exposure and earned media value – we have skillfully built a growing global fan base of millions of consumers That typically goes beyond geography, gender, age and income,” Reichert said.
Birkenstock and L Catterton declined to comment.
From village cobbler to cultural icon
The first record of the name Birkenstock in relation to the footwear industry was in 1774, when Johann Adam Birkenstock was recorded as a “subject and cobbler” in his German village. Johann’s grandson, Konrad Birkenstock, followed in his grandfather’s footsteps, designing the world’s first footbed with contoured arch support in 1902. They later sold flexible arch support inserts to German shoe manufacturers. The first Birkenstock sandals were created in 1963 by Konrad’s grandson Carl. In 1966, this iconic shoe was brought to America by Margo Fraser, a German dressmaker living in California. This is probably where the brand’s “hippie” association first came into existence – the shoes were stocked primarily by health food stores.
Birkenstock’s first foray into high fashion was through a shoot photographed by Kim Knott for the British Eli In 1985. Five years later, the shoes became even more established in America’s fashion consciousness when iconic model Kate Moss wore them during her cover shoot. face (Shot by Corinne Day). In recent history, the brand has collaborated with many other big names in fashion, including Rick Owens, Dior and Manolo Blahnik.
Jeremy Moeller | Getty Images Entertainment | getty images
The company’s latest publicity driver may be the biggest yet: The brand’s Arizona sandals have a starring role in this summer’s blockbuster billion-dollar movie “Barbie.” In the film, Barbie (played by Margot Robbie) is forced to choose between pursuing the knowledge of the “real world” – Birkenstocks – or returning to a state of ignorance – an unbranded stiletto. Although Barbie attempts to choose stilettos, she ultimately chooses Birkenstocks, and proceeds to learn the truth about the human world. At the end of the film, Barbie is shown wearing pink Birkenstocks in the real world.
Current IPO Market Scenario
The IPO market has come to a screeching halt since the pandemic crashed the stock offering boom, and successful IPOs have included iconic brands, such as the spinoff of Johnson & Johnson’s consumer health business that included Tylenol and Band-Aids in the Kenview IPO .
According to Bochanis, the brand identity that Birkenstock has built during its nearly 250 years of existence bodes well for the upcoming IPO.
“IPO investors right now are looking for something they’re familiar with, something that’s a little more predictable in these unusual times,” he said. “We haven’t seen a lot of attractive, pre-profit enterprise software companies going public. Instead what we’re seeing are names that people are familiar with, business propositions that can really withstand these tough environments and Birkenstock Fits the bill. I mean, it’s almost 250 years old. It’s a company that everybody knows.”
Yet, while Kenview was the biggest deal of the year, it is barely holding on to its IPO price today, according to CNBC and Renaissance Capital data, and the IPO market overall has not performed well since listing. Sixty-four percent – or 45 out of 70 IPOs year-to-date – are trading below their IPO price. Most of those deals have been at the smaller end of the market cap, and even the tech sector, which was hit hardest in the IPO freeze, is now moving ahead, with chip giant Arm and grocery startup Instacart this week and next week. Planning to go public.
The performance of retail stocks has been weak this year
“Birkenstock is in a class of its own,” said Mark Cohen, director of retail studies at Columbia Business School. “It’s a long-standing brand, it’s been around for a very long time. It’s very well known, it has a niche customer who appreciates its brand equity, its size and finish and style and comfort Are.”
But Cohen says investors shouldn’t count on its success as a new publicly traded stock.
COVID-19 brought significant and sudden changes to the retail industry, but many of those changes have reversed course as the pandemic subsides. Meanwhile, inflationary trends will continue to weigh on consumer spending in the near term. Most consumers have no experience dealing with inflation as adults, Cohen said. “We’re dealing with a very strange series of events that is continuing because of COVID,” he said.
Add to the list of risks the proliferation of knockoff Birkenstock products on Facebook, which the company pointed out in its IPO filing.
Although inflation has come down from its peak, there are signs that it will persist, and consumers cut back on discretionary spending in such an environment. Credit concerns have also reached levels not seen since 2009. Even if Wall Street companies have reduced the likelihood of a recession hitting, it’s still a risk with significant consumer implications, though perhaps not a risk that will impact quickly enough to dampen current IPO enthusiasm.
JPMorgan CEO Jamie Dimon said earlier this week that although the US economy is performing well, it would be risky to believe this will last for years. “To say that because consumer sentiment is strong today means you’ll have years of bullish sentiment is a huge mistake,” Dimon said. “If and when you have a recession, which you’re going to have eventually, you’ll have a really normal credit cycle,” Dimon said. “In a normal credit cycle, something always happens worse than expected.”
But for now, consumer sentiment remains high, Bouchanis said, “but if it changes dramatically, if there is the small possibility that we appear to have a hard landing, then it could seriously impact discretionary spending.” Can do.”
“Most retail stocks are nowhere near their recent high water marks,” Cohen said. “There is a lot of skepticism in the market in general and the retail sector is no different.”
The S&P SPDR Retail ETF is up about 3% this year, but that’s far from the pace set by the S&P 500, and it’s down more than 6% in the past month.
Next Crocs or Allbirds?
Two possible paths to footwear IPOs can be traced back to the history of Crocs and Allbirds.
Although its shares have been under pressure this year, Crocs, which went public in 2006, has seen much of the rise in its stock market history since it began trading at $21. Like Birkenstock, the brand has successfully collaborated with various designers, including Balenciaga, and also relies on a loyal customer base that appreciates the comfort of the product.
Allbirds, which went public in 2021, also opened around $21, but is trading closer to the $1 range.
Cohen said, “This is a movie that doesn’t always have a wonderful ending.” “Recent example: Creation of Allbirds. Wildly successful, like a one-trick pony, but very successful, very popular. The company went public.”
But, he said, Allbirds wants too much development in too many areas.
Cohen said, “The leadership, whether driven by their investors, or because they were short on cash, set about trying to expand the brand and ruin the company. And now we’re in the process of layoffs.” He said, “They expanded their offerings beyond shoes to apparel and accessories, assuming consumers would be equally interested in purchasing these products. … That certainly didn’t happen.”
Birkenstock has expanded beyond its core footwear products to include skin care, accessories, and sleep systems. And it faces – and is detailed under IPO risk factors – all the same challenges that consumer brands cannot avoid: a consumer base whose preferences cannot be predicted with certainty; A single, discretionary product category that is sensitive to sudden changes in consumer trends and spending; The need to innovate at a rapid pace to survive amid changing styles and intense competitive pressures; And there is a need to not only find new customers but also retain existing customers who represent a significant percentage of the revenue.
Birkenstock says its direct sales channel is becoming increasingly important to brands in the changing retail landscape and the age of e-commerce, growing from 30% of revenue in fiscal 2020 to 38% of revenue in fiscal 2022 In which special attention has been given. According to data cited by the company in its IPO document, the average Birkenstock consumer in the US owns 3.6 pairs. It sees significant scope for growth in the global footwear market that generates over $350 billion in annual retail sales and where the top five brands hold 20% of the market, especially in the Asia-Pacific region. “Based on our current market penetration of less than 1%, we believe there is substantial potential to grow the Birkenstock brand,” the IPO prospectus said.
But the retail market is a highly unpredictable market, and it has its own advantages and disadvantages.
Cohen said, “The beauty of retail is that every day is a new day. The curse of retail is that every day is a new day.” “Today’s success doesn’t predict tomorrow’s results – you have to earn your contribution on an ongoing basis.”
Source: www.cnbc.com
